blockchain is eating software, the internet, data and the world.

​and it's hungry for seconds.

Some comments, given several friends in the past week have asked me about them:

1. The crypto bubble will not happen in the major coins. It will happen in the alts.

2. Don't buy "because" something has and is going up. Your impulses and FOMO will ruin you. Generally good life advice. ​

3. It feels like startup investing, doesn't it? You pick nascent businesses with potentially impactful ideas to invest in. Well, an investment in a startup is called a security. Not all cryptos are securities, but many are. The Securities and Exchange Commission has increasingly stepped up enforcement against altcoin offerings in the past few weeks, and is likely to continue to ramp up in 2018. State securities agencies are increasingly taking action, too. What happens when they send a cease and desist letter to your favorite coin? The value drops considerably. Securities laws allow investors to "undue" this kind of investment, but with blockchain and mining, there's no central actor to get your money back from. You lose, and the miners take your money.

4. What are your favored cryptos doing that Bitcoin and Ethereum can't? Do you really need an entirely new network for paying for online content when you can already do so with Bitcoin, once its growing pains (e.g., transaction costs) are solved? Do you have bank accounts at seven different banks? Probably not, since no one wants to use more mechanisms of payment if they can use fewer. If you're not familiar with forking, read up on it. Anything a "more efficient" crypto can do, Bitcoin can do (by adopting or updating that feature), too. As for "functional, utilitarian" coins like Ethereum, a lot are actually built on Ethereum's blockchain, or can be grafted on it.

5. Sure, you can make 400% in a day. You can also lose 100% in an hour.

6. "Survivorship Bias" is the phenomenon that advertised "winners" are self-selecting. You may have heard about Ripple's skyrocketing growth, but have you heard about the 1,000 coins that lost all value and dropped out of existence in the same period? What you see in the news, social media and on charts is not representative at all. Check your FOMO.

7. Size of coin does not matter. If a coin loses 50% of it's value, it doesn't matter if it started from $1000 or $1. You lose the same amount of money. Importantly, smaller cryptos are more volatile and riskier.

Crypto is here to stay. This is not the first time an international, private currency has evolved after the public lost faith in sovereigns' abilities to manage their own finances and their countries' financial sectors (blog post on this is forthcoming).

Do your homework. Don't be impulsive. As Nassim Taleb stresses, actual outcomes are a factor in probability. Your outcome could be lasting gains. Or it could be enticing initial gains followed by complete, irreversible loss.

But if you'd still like to run blindly into a world you had no understanding of a month ago, let me tell you about this new crypto from the Netherlands, "TulipCoin."

Archives

This website and any communications related to it do not create a lawyer-client relationship. The material provided on this site may not reflect the most current legal developments. We disclaim all liability for actions taken or not taken based on any or all of the content of this site. Do not act or refrain from acting upon any information herein provided without seeking professional legal counsel.

Nothing written, linked or referenced is financial or investment advice.

The views, explanations, positions and statements made on this blog are not to be treated as conclusive opinions of any person or entity, whether lawyer, law firm, investment adviser, investment institution or the like.

You can stay up-to-date with crypto news and regulation by subscribing to our (infrequent) email list: